EU Court of Justice on internet advertisements affecting trademarks

Interflora Inc. and Interflora British Unit bring proceedings against Marks & Spencer plc concerning the display on the internet of M & S advertisements based on keywords corresponding to the trade mark Interflora, whose action is established for infringement of trade mark rights.

National court decides to stay the proceedings and refer to the Court for a preliminary ruling upon interpretation of Article 5 of First Council Directive 89/104/EEC of 21 December 1988 relating to trade marks Member States laws and Article 9 of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark.

The business of selling flowers online

Interflora Inc. is a worldwide flower delivery network made up of independent florists. It is a company incorporated in the US State of Michigan (United States of America), and operates its international delivery service of flowers by means of many licensees. Interflora British Unit is one of them.

Orders placed by customers in person or by telephone or via the internet, are fulfilled by the network member closest to the address to which the flowers are to be delivered.

When the customers place their orders via web site www.interflora.com they are redirected to country-specific websites such as www.interflora.co.uk.

The Interflora trade mark have a substantial reputation in the United Kingdom and in other Member States of the European Union.

Marks & Spencer is a general megastore based in the United Kingdom and retailing a wide range of goods and supplies services through its network of shops or via its website. Among other goods, Marks & Spencer sells and deliveries flowers. Obviously, Marks & Spencer is not a member of the Interflora network group.

Search engines provide paid referring service for advertisers

Google is an internet search engine that displays the sites corresponding to search keywords, in decreasing order of relevance.

Alternatively, sites can be displayed by Google on top of natural search results if they adhere to AdWords service.

It is a paid referencing service enabling any economic operator to reserve one or more keywords. Any time they match with one or more words entered by a user as a request in the search engine, an advertising link to its site is placed under the heading ‘sponsored links’, which are displayed on prominent part of the screen.

Under the advertising link is showed a short commercial message. The whole ad is constituting the referencing service advertisers are paying Google for.

The advertiser pays a fee for each click on the advertising link, calculated on the basis of the maximum price per click he agreed to pay and on the basis of the number of times that link is clicked on by internet users.

It may happen that a relevant number of advertisers reserve the same keyword. In this case, their advertising links are displayed according to the maximum price per click, to the number of previous clicks on those links and to the quality of the ad as assessed by Google.

Should the advertiser fix a higher maximum price per click or improve the quality of its ad, its ranking on the display is improved too.

All the process of selecting keywords and creating ads is automated and directly handled by advertisers.

Keywords matching with trade marks can constitute an infringement case law

Marks & Spencer is one of those advertisers.

The keyword it selected for the AdWords referencing service is interflora and expressions containing the same word. As a consequence, when a user enters the term interflora, on the upper part of the screen appears a Marks & Spencer ad whose text is M & S Flowers Online, www.marksandspencer.com/flowers, gorgeous fresh flowers & plants, order by 5 pm for next day delivery.

Since it clearly misses any reference to Interflora Inc, the British flower delivery network headed National Court for infringement of trademark, arguing that users can be easily confused by the ad.

The UK High Court refers ten questions to EU Court of Justice

The High Court of Justice of England & Wales, Chancery Division, made by decision of 16 July 2009, in the proceedings between Interflora Inc. v Marks & Spencer plc, refers ten questions to the Court of Justice for a preliminary ruling. By decision of 29 April 2010, the EU Court withdraws its fifth to tenth questions.

Four questions maintained for ruling regarding EU law upon trade marks and competition

Interflora calls for trade mark infringement. The four questions maintained for ruling by the Court are whether certain acts involving the use of a sign identical to a trade mark can constitute use of the sign by the competitor within the meaning of Article 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94]; whether such use is within the meaning of Article 5(l)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94]; whether any such use falls within the scope of either or both of Article 5(1)(a) of [Directive 89/104] and Article 9(1)(a) of [Regulation No 40/94] and Article 5(2) of [Directive 89/104] and Article 9(l)(c) of [Regulation No 40/94]; whether the search engine should be lead to avoid any use of the keywords when confusing with a trade mark.

M & S states that the argument creates an imbalance as between the interest in protecting intellectual property and the interest in free competition.

Interpretation of the EU law set by the Court

First, the Court rules that Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 must be interpreted as meaning that, when a keyword is identical with the trade mark whose proprietor has not consented to its use, the proprietor of the trade mark is entitled to prevent a competitor from advertising goods or services identical with those for which that mark is registered where that use is liable to have an adverse effect on the trade mark.

Adverse effects of the sponsored links to the trade mark’s functions

Adverse effects can be described as affecting the trade mark’s function of indicating origin (it happens when the ad does not enable internet users to ascertain whether the goods or services pertains to the proprietor of the trade mark or to a third party) or its investment function (and it happens when it interferes with the proprietor’s capability to attract consumers and retain their loyalty).

The situation referred to the aforementioned law frame is called ‘double identity’ for a third party uses a sign in relation to goods or services identical with those for which a trade mark is registered. However, the exercise of the exclusive right conferred by the trade mark is reserved by EU law to cases in which the use of the sign adversely affects the functions of the trade mark.

As to the adverse effect on the function of indicating origin, the assessment regards first whether the reasonably well-informed and reasonably observant internet user are aware that M & S’s flower-delivery service is not part of the Interflora network and whether M & S’s advertisement enabled that internet user to tell that the service concerned does not belong to the Interflora network.

As to the adverse effect on the advertising function, the Court outlines that, although one of the European competition law’s essential elements is the trade mark, protecting its proprietor against practices inherent in competition is not its main purpose.

As to the adverse effect on the investment function, it is needed an alteration of the fair competition to prevent a competitor from using a sign identical with a trade mark in relation to goods or services identical with those for which the mark is registered.

Reputation of the mark should be affected by unfair advantage to call for protection

Second, the Court rules that Article 5(2) of Directive 89/104 and Article 9(1)(c) of Regulation No 40/94 must be interpreted as meaning that, when a competitor selects a keyword in an internet referencing service which is correspondent to a trade mark with a reputation without its proprietor’s consent, the proprietor of the trade mark is entitled to prevent a competitor from advertising where unfair advantage of the distinctive character or repute of the trade mark is taken or where the advertising is detrimental to that distinctive character or to that repute.

The recalled law provisions apply since Interflora trade mark has a reputation and since M & S’s use of a sign identical with that mark as a keyword was made in relation to a service identical with that for which that mark has been registered, even if selecting a keyword identical with a trade mark with a reputation does not necessarily constitute a development of the mark.

In fact, the proprietor of a trade mark with a reputation is not entitled to prevent advertisements displayed by competitors just on the basis of keywords corresponding to his trade mark if it is not offering a mere imitation of the goods or services of the proprietor of that trade mark, or causing dilution or tarnishment, or adversely affecting the functions of the trade mark with a reputation.

The Search Engine can not be liable of infringement if the advertiser chooses keywords identical with trade marks

The legal context whose interpretation is provided by the Court, Directive 89/104 and Regulation No 40/94, have been repealed by, respectively, Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008. It is an action due to approximate the laws of the Member States relating to trade mark protection, and the referring court should consider that the relevant provisions that are relevant for the case were not materially amended by adoption of new provisions.

The Court recalls that the search engine operator or its paid referencing service are not using signs thus their activities does not fall under Article 5(1) of Directive 89/104. It is indeed the advertiser who chooses a keyword identical to a trade mark of another and who uses the trade mark, not the search engine.

 Law cases under same provisions

The Court ruled in Adidas-Salomon and AdidasBenelux that the same law provisions under scrutiny establishes specific protection in cases of use by a third party of a sign identical with a registered mark with a reputation in relation both to goods or services not similar and to goods or services identical with that mark.